The Key Issues in the

Malaysian Construction
Industry: Public and Private
Sector Engagement
During Persidangan Pegawai Kanan
KKR
dan
Agensi 2011
By:
Mr. Aziz Tan Sri Bahaman
MBAM Vice President
Thursday, 5th May 2011
Hotel Equatorial, Penang

Presentation Outline

Construction Growth 2001-2010

Construction Outlook for 2011
Key Issues of the Construction Industry
Conclusion

Overview
9th Malaysia Plan (9MP) was envisaged to ensure that the economy
will be more focused on capital and services and the private sector
would be the main engine of growth.
However by the end of 9MP, the economy did not grow at 6% per
annum during the 5 year period as envisaged. (Average annual
growth was about 3.2%)
Real commitment and a realistic execution plan has to be devised to
ensure the success of the 10th Malaysia Plan (10MP) which also
charts a 6% growth target.

Sustainable Construction Growth

Year

2001

2002

2003

2004

2005

2006

2007

2008

Real GDP

0.3

4.1

5.3

7.1

5.2

5.9

6.3

4.6

-1.7

7.2

Manufacturing

-5.8

4.0

8.2

8.8

5.1

7.8

3.1

1.3

-0.3

11.7

Services

5.8

4.1

4.1

6.7

6.5

6.4

9.6

7.3

2.6

6.9

Agriculture

-0.9

3.0

5.5

5.0

2.5

6.4

2.2

3.8

0.4

1.9

Mining

-0.8

3.7

4.8

4.1

-0.8

-0.9

4.2

-0.8

-3.8

0.2

Construction

2.1

2.3

1.9

- 1.9

-1.6

-0.5

5.5

2.1

5.7

5.3

Source: BNM Yearly Reports

2009

2010

Year

Total Projects Value

GDP

(RM mil)

(%)

2002

48,312.55

2.3

2003

49,559.88

1.9

2004

52,694.36

-1.9

2005

54,277.08

-1.6

2006

60,926.99

-0.5

2007

94,416.83

5.5

2008

85,837.08

2.1

2009

73,413.55

5.8

2010

58,346.28

5.3

Source: CIDB Quarterly Statistical Bulletin

100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

-1

10,000

-2

-3
2002

2003

2004

2005

2006

2007

2008

2009

GDP (%)

Total Projects Value (RM mil)

TOTAL CONSTRUCTION PROJECTS VALUE VS GDP

2010

Year / Quarter
Total Projects Value (RM mil)

GDP (%)

2011 Outlook for Construction Industry

The outlook for the construction industry looks positive in year
2011 with the launching of the 10th Malaysia Plan (10MP) &
Economic Transformation Program (ETP) with many entry
point projects to be launched under the 12 National Key
Economic Areas (NKEAs). The growth anticipated for the
construction industry is to be within expectation in the region of
5% - 6%.

What are the Key Issues of the

Construction Industry?

Key Issues of the Construction Industry

Challenges of the Construction Industry

The challenges of the construction industry are to
ensure that we attain and are able to sustain the
anticipated growth. As such timely & successful
implementation of the entry point projects under the
NKEAs is required.

Key Issues of the Construction Industry

Timely dissemination of information on

projects
The Government to kick off all the proposed 2011
budgeted projects on time to balance up the gestation
period and growth anticipated for the construction
industry. As such besides the approval of the Mass
Rapid Transit (MRT) system for the improvement of
the public transport at the Klang Valley, other projects
such as the highway projects and Greater KL Plan
need to be approved and rolled out too.
10

Key Issues of the Construction Industry

Public Private Partnership (PPP)

The Government is putting emphasis on PPP under the 10MP.
However, there are several concerns that need to be addressed.

Provision of Assurance on Good Investment

With the implementation of ETP and Public Private Partnership (PPP),
the private sector is supposed to play a bigger role in the
implementation of projects whereby the major responsibilities are
moved from the public to the private sector. PPP in fact transfer
massive amount of risk from the public sector to the private sector
resulting in few companies with strong technical capabilities and
financial strength willing to undertake projects involving PPP.
As
such, the Government needs to provide some form of assurance and
more incentives to the private sector in order for them to be willing to
invest in these projects proposed by the Government as we move
forward to the development as a high income nation.

11

Key Issues of the Construction Industry

PUPLIC PRIVATE PARTNERSHIPS (PPP)

Fair and transparent bidding process for projects
There is a need for more transparency in the award of projects with
implementation of open tender systems for bidding of Government
projects. MBAM appreciates the announcement that all works will be
implemented by open tenders which will reduce wastage and generate
more value for money. We hope that with the adoption of proper
tender evaluation criteria, more competent contractors and the related
supply chain will benefit from these contract packages.

12

Key Issues of the Construction Industry

PUPLIC PRIVATE PARTNERSHIPS (PPP)

Land Issues
The Government should sort out land issues instead of the contractor
to sort out the matter when it comes to PPP projects.

Compensation/Grant
Compensation or grants should be considered for bidders since it can
be quite costly for bidders to submit proposals. By considering
compensation or grants, more companies may consider proposing and
bidding for PPP projects which will eventually benefit the rakyat.

13

Key issues in Construction Industry

HIGH NUMBER OF CONTRACTORS

There is a high percentage of contractors but only about 12% are
actually running construction business. There is an urgent need
to regulate the number of contractors.
There is a need to limit number of contractors, raise standards
of registration and pre-qualification of contractors to ensure
quality delivery from capable and committed contractors fewer
but stronger players.

14

Key Issues of the Construction Industry

Number of Registered Contractors

as of 1Q,2011
State
End of Period

Total
Contractors
Registered

Contractors Registered By Contractor Registration Grade

G1

G2

G3

G4

G5

G6

G7

Johor

6,523

3,291

979

1,155

346

324

136

292

Kedah

3,506

2,128

513

360

123

144

66

172

Kelantan

3,327

2,311

297

311

81

146

48

133

Melaka

2,204

1,113

341

365

113

126

41

105

Negeri Sembilan

3,423

2,239

401

438

93

129

42

81

Pahang

3,703

2,166

477

579

163

151

49

118

Pulau Pinang

3,268

1,375

567

640

133

206

96

251

Perak

4,374

2,618

591

627

161

190

76

111

Perlis

1,205

972

86

71

22

28

22

10,247

4,413

1,143

2,090

561

809

271

960

Terengganu

3,630

2,297

316

385

150

221

80

181

Sarawak

7,286

4,686

886

922

149

214

83

346

Sarawak

2,999

1,248

525

469

141

186

91

339

Wilayah Persekutuan

8,180

1,916

827

2,080

493

1,061

387

1,416

63,875

32,773

7,949

10,492

2,729

3,935

1,470

4,527

Selangor

1st Quarter or Year 2011

Source: CIDB

15

Key Issues of the Construction Industry

HUMAN RESOURCES AND MANPOWER ISSUES
The massive roll-out of projects will require numerous skilled workers, both local
and foreign to ensure its successful completion, considering the complexity and
fast-track nature of the projects.
There is an urgent need to provide quality construction industry-based training to
meet the construction industrys needs especially for the up skilling of the current
local construction workforce.
The Government to train local workers to replace foreign workers as well as to
reduce the total number of foreign construction labour to 200,000 by 2015 as per
the Governments long term policy on reducing the reliance on foreign workers.

16

Key Issues of the Construction Industry?

Need to stop flow of competent human resources out of the country, especially in
the professional, managerial, supervisory and skilled labour segments of the
construction job markets.
Need to breed interest in construction related careers and to do this Government
should continue to teach construction related skills in vocational schools.
Industrialized Building Systems (IBS), Mechanization and other labour saving
methodologies must be encouraged in order to drive yield of construction workers
to achieve a higher income economy.
Need to prepare for free flow of workers within ASEAN countries by 2015.

17

Key Issues of the Construction Industry

Local Workforce Based on Registration

Category & Age
Category

Age At 31.12.2007

Total

< 31

31-40

>40

108,544

58,377

68,247

235,168

Semi-skilled Worker

24,623

8,897

7,527

41,047

Skilled Worker

40,193

33,023

41,575

114,791

100,297

117,349

391,006

7,065

12,668

24,588

44,321

11,020

21,436

34,710

67,166

Sub-total

18,085

34,104

59,298

111,487

Total

191,445
(38.1%)

134,401
(26.7%)

176,647
(35.1%)

502,493

General Worker

Sub-total
Supervisor
Construction Managers & Prof

173,360

Note:
1) 35.1% local construction personnel will reach the age of 50 years and above in 2017.
2) There are about 300,000 legal foreign construction workers in addition to 391,006 local workforce
(43% of the total construction workers)
Source: 1st Malaysian Construction Summit 2008 6th June 2008, Paper presented by Datuk Ir Hamzah Hasan,
Chief Executive, CIDB

18

Key Issues of the Construction Industry

Construction Payment & Adjudication Act (CIPAA)

The industry needs CIPAA. Mentioned of this proposed act has been traced
back since it was brought up at an Industry Roundtable Meeting in 2005 by
the Minister of Works.
CIPAA will be able to resolve all issues regarding payment problems, late
payment, under payment and non receipt of payment in the construction
industry.
If CIPAA was made a reality, it would provide the contractors an alternative
avenue to resolve the disputes quickly and at affordable costs. Existing
dispute resolution mechanisms in the Construction Industry such as
Arbitration and Litigation are time - consuming and are often expensive.

19

Key Issues of the Construction Industry

GOING GLOBAL

There are opportunities overseas but there are challenges too.

Need to secure financing for company going overseas.
Opportunities to foster closer co-operation among the construction contractors
and thereby promote joint ventures and joint operations for enhancement of
Malaysian construction contracting capabilities and also to help promote
mutual consultation among construction contractors and thereby encourage
exchange of information and know-how for improvement of construction
technology and management, upgrading of construction labour skills and
standards.
Promotion of Malaysian construction services overseas through international
trade exhibitions.

20

GOING GLOBAL
Overseas Projects Awarded To Malaysian Contractors
By Year 2000~1Q2011
25,000

19,551.31

Value (RM Million)

20,000

14,010.57

15,000

9,554.22

10,000

10,189.88

9,467.37

6,145.05
5,000

3,733.98
2,105.69 2,443.04

2,950.27
1,491.03
58.50

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

1Q2011

Year

(Source: CIDBs Construction Quarterly Statistical Bulletin as of 31 March 2011)

21

GOING GLOBAL
Overseas Projects Awarded to Malaysian Contractors By Country
Year 1986 ~ 1Q2011
20,000
18,000

17,689.99

16,000
14,000

13,077.36

12,000

11,132.13

10,000
8,091.51

8,000
6,000

5,277.75

5,059.27

2,699.44

2,719.43

2,429.32

2,002.00

1,905.59

1,819.00

South Africa

2,781.23

Bosnia
Herzegovina

3,489.00

4,000

Iran

RM Million

12,076.21

2,000

Other

Thailand

Indonesia

Vietnam

Bahrain

Sudan

China

Libya

Qatar

UAE

Saudi Arabia

India

Country

(Source: CIDBs Construction Quarterly Statistical Bulletin as of 31 March 2011)

22

Number and Value of Projects Taken by Malaysian Contractors Overseas

Number & Value of Projects Undertaken by Malysian Contractors in Global Market
14,000.00

Value (RM m)

12,000.00
10,000.00

ASEAN
India

8,000.00

Middle East
6,000.00

Africa

4,000.00

Others

2,000.00
2005

2006

2007

2008

2009

2010

1Q2011

Year

23

Conclusion
MBAM hopes that with the launch of the 10MP, and the
implementation of the Entry Point Projects with the ETP, we will be
able to see a better growth in the second half of the year 2011 for
the construction industry.
In year 2011, building materials manufacturers will still have the
potential to produce sufficient building materials to support the
growth of the construction industry and there is still room to match
capacity with demand for raw material prices as we move towards
liberalization.
In addition, with the implementation of the Competition Act with
effect from year 2012, we will move towards more healthier
business environment with no cartel of services.
The Government must take the initiative and role to facilitate and
provide the infrastructure and ensure the human talent is available.
24

Thank You

25